South Gobi


Terra Energy owns and operates the Baruun Noyon Uulcoal (BNU) mine in Noyon Soum of the Umnu Gobi province. The licence is located on 17431.96 hectares of land located in territory of Noyon soum, South Gobi province. The project is located in a region, where the infrastructure is poorly developed. However, mining activities are increasing and will be the key to the region’s economic and infrastructure development. The project is strategically located approximately 80km east of Nariin Sukhait which includes South Gobi Resources’ (SGS) Ovoot Tolgoi mine and the MAK mine, which produce and export coking and thermal coal to customers in China.

The South Gobi Project has the potential to support near term development via an open-cut coking coal operation.

JORC resources for BNU Mine consist of 15.26Mt Measured, 8.77Mt indicated and 3.04Mt inferred.

Also located in the South Gobi Project is the proposed East Pit. Salva Resources has estimated a maiden 41 Mt JORC Inferred Resource based on previous exploration results from the East Pit.

Mining operations at BNU are conducted by Terra Energy and supported by Grand Power under a labour hire agreement and the heavy equipment is provided and maintained by Wagner Asia.

Development Update July 2013

Progress at our South-Gobi project is continuing as planned.

July 2013: Overburden removal activities adjacent to the completed Test Pit #3

July 2013: Overburden removal activities adjacent to the completed Test Pit #3

July 2013: Excavators benching down to top of coal

July 2013: Excavators benching down to top of coal

 

The equipment currently in use comprises relatively small capacity excavators and trucks but production rates being achieved are satisfactory and consistent with the overall project schedule. Larger equipment including a Caterpillar 300 tonne excavator and Caterpillar 777 (80 tonne) dump trucks will start arriving this month.

In other developments:

  • The excavation of the two (2) additional standard type test pits for further validation of coal quality specifications is complete, enabling more samples to be taken for metallurgical analysis.
The illustration depicts the physical location of the test pits, noting the distance between Pit 1 & Pit 3 is approximately 1.5km

The illustration depicts the physical location of the test pits, noting the distance between Pit 1 & Pit 3 is approximately 1.5km

coalbagimage

Random sampling and bagging of coal extracted from Test Pit 2

Currently BNU coal undergoes coal analysis and testing at the BNU laboratory in the raw form. The raw analysis of coal samples are collected from the pit, Coal ROM and exploration drilling. These are then tested for proximates, Calorific Value, Sulphur, Density, Sapzhinokov X and Y, Crucible Swell (CSN) and G index.

A program is currently underway to perform further analysis of our coal to determine simulated product analysis and to further understand the coal further. Simulated product analysis includes Blending and Washability followed by product coal analysis. Detailed coal analysis includes Petrographics, Coke Strength (CSR, CRI), Dilation, Ash Fusion, elements and coal recovery analysis.

Float Sink provided the best results to date. The cumulative floats curve indicates a high yield product with ash not inherent. The quality specification parameters are encouraging and coupled with efficient mining techniques will mean the operation, when stabilised, will produce a coal type close in specification to Prime Coking Coal.

  • Discussions with potential off-take parties regarding coal supply agreements are continuing. Some potential customers have expressed a desire to visit the mine site. This will be facilitated and visits are expected to commence in August. Off-take negotiations can then be concluded, enabling unit coal price and revenue estimations to be made.
  • Negotiations with suppliers and constructors of mine support facilities including accommodation camp, workshops, fuel bay, offices and crushing plant are proceeding satisfactorily. Construction activities remain scheduled to commence in July.

Check here for the company’s Mongolian Update, released 4 July 2013.

Progress 2013-14

In the half year to December 2013, development activities advanced significantly, financing requirements were achieved and key approvals obtained.

Check here for the company’s Financing and Mongolian Update, released 23 December 2013.

The 98klm haul road was completed in late 2013.

In July, 2014, the company secured a haulage permit from the Mongolian Ministry of Roads and Transport, which allows transport of coal from the Baruun Noyon Uul (BNU) Mine.

Check here for the ASX announcement on the haulage permit.

The mine is now fully commissioned and the transport of coal to China has commenced.

Coal is being transported along the new road, and subsequently passes through the Shivee Khuren border crossing in Mongolia and then onto Ceke in China.

Commercial arrangements are in place for a Mongolian company to transport the coal.

The BNU Mine has generated widespread interest from potential customers and investors. The first 8000 tonne shipment of coal occurred on 25 August and a ceremony, attended by the senior company and Mongolian Government officials, took place to mark this milestone.

Check here for the ASX and media announcements regarding this event.

This shipment will also confirm the down-stream logistics and processing performance of the BNU coal product.

There has been early interest in the product by companies including:

  • Shenhua Wuhai
  • Taixi Wuhai
  • Jiuquan Iron and Steel Group (JISCO) Gansu
  • Qunhua Inner Mongolia
  • Jinda Wuhai.

The next priority for Terra Energy will be to finalise negotiations with a number of these companies in China to secure long-term offtake agreements for the BNU coking coal brand.

In mid October, 2014, the BNU mine commenced its second shipment of 14,300t of coal. Testing of this batch was due to be completed by 30 October. Check here for the latest ASX announcement and media on the BNU Mine.